Your home may be repossessed if you do not keep up repayments on any loan secured against it. Think carefully before using your property as security. Seek independent financial advice if you are unsure whether a secured loan is right for you.
Quick answer
Borrowing against your home means using your equity as security for a loan. You can do this by taking a second charge loan alongside your existing mortgage, or by remortgaging to a larger mortgage and releasing the extra funds. Both routes can deliver large sums at lower rates than unsecured borrowing, but both place your home at risk if repayments are not maintained.
How to Access Your Home's Equity
There are two main regulated routes to borrow against your home:
1. Second charge (homeowner) loan
A separate loan secured against your home, running alongside your existing mortgage. Your first mortgage is unaffected. This is often the right choice when you are on a competitive fixed mortgage rate with significant early repayment charges that would make remortgaging expensive. See our guide to second charge mortgages.
2. Remortgage to release equity
You replace your current mortgage with a larger one and receive the difference as cash. This restarts your mortgage product and could involve early repayment charges if you are mid-way through a fixed deal. If you are near the end of a fixed term, this can be the most cost-effective option. See our remortgages hub.
Calculating Your Available Equity
Your usable equity is not simply the gap between property value and mortgage balance. Lenders require you to retain a minimum equity level (typically 15-20% of the property value) as a buffer. The calculation:
Maximum borrowing = Property value - outstanding mortgage - lender's required minimum equity
A formal valuation will be required. Lenders typically cannot rely on your own estimate of the property's worth.
The Responsibility of Secured Borrowing
It is important not to treat your home equity as an ATM. Each time you borrow against your home, you are increasing the total debt secured against it and reducing your financial cushion. If property values fall, you could end up in negative equity. If your income falls, maintaining both your mortgage and the secured loan becomes harder. Always stress-test your repayment ability before committing.
Frequently Asked Questions
It means using the equity in your property - the difference between its current value and how much you still owe on any existing mortgage - as security for a loan. The lender registers a legal charge on your property at the Land Registry, giving them the right to recover their money from the property sale if you do not repay as agreed. In return, you typically get access to larger sums and lower interest rates than unsecured borrowing allows.
Most lenders require you to retain at least 15-20% equity after the new borrowing is factored in. For example, if your home is worth £300,000 and you have £150,000 remaining on your mortgage, you have £150,000 of equity (50%). If a lender requires 20% retained equity, you could potentially borrow up to £90,000 (leaving £60,000 equity = 20% of £300,000). A lender will instruct a valuation to confirm the property value.
Most lenders do not restrict the purpose, but common uses include home improvements (extensions, conversions, renovations), consolidating high-cost unsecured debt, funding a business, covering large one-off expenses such as a wedding or survey, and education costs. Some lenders have restrictions on gambling-related purposes or certain types of investment. You should declare the purpose honestly in your application.
Yes, but check the early repayment charge (ERC) terms before committing. Fixed-rate secured loans often have ERCs during the fixed period - similar to mortgage early repayment charges. These can be significant on large balances. If you think you may want to exit the loan early, factor ERC costs into your decision about which product to choose and how long a fixed term to take.
A secured loan registered as a charge on your property must be repaid when you sell. The sale proceeds will first repay the first mortgage, then your secured loan, with any remaining funds going to you. This is important to bear in mind if you are considering moving - the loan cannot typically be transferred to a new property without the lender's agreement, and you will need to repay it at completion.
Disclosure
Fundslender is a UK borrowing information and guidance website. We do not lend money directly. When you use this site, you may be connected with regulated lenders or brokers. We may receive a fee or commission if you proceed with a product found through our site. This does not affect our editorial independence or the information we provide. Rates, terms, and approval decisions are set by each individual lender and will vary based on your personal circumstances. Approval is not guaranteed. All borrowing involves risk. Always compare your options, read the full terms, and seek independent regulated financial advice if you are unsure whether a product is right for you. How we make money · Editorial policy